Out of State vs. Local for First Property

[Ben Nadeau]

Hey BP community, I'm at a stage in my learning process where I am ready to pull the trigger on my first investment property, pending current economic uncertainties but that is a post I've seen covered plenty already so we wont get into that! It'll be a single-family, long-term, buy and hold rental using BRRRR. In my analysis of local (Bend, OR) and a couple out of state markets, it is, as suspected, very clear that my local markets rent to price ratio is unfavorable (think $350k house rents for $1600). Flipping in my local market seems to be the most logical strategy but I'm aspiring for long-term holds.

I am moderately handy and want to stick local for my first deal to cut costs of the rehab and have the overall comfort of having this investment close by. Being able to manage the rehab, DIY when I can, cut out property management to start off, etc. are all enticing me to stay local. Local market does not have many fixer uppers hitting the market, but I need to search harder off-market. Best current opportunity... I recently found a potential deal in a town 45 mins away, $105k asking, complete rehab need estimated at $65k, ARV = $220k, estimated rent is between $1250-1350. Downfalls, it is small town that has had history of getting hit hard in recessions with high unemployment and decreased property values. Positive, Facebook and Apple have built data centers here in the last couple years bringing some higher paying jobs.

I have a potential boots on the ground partner in one of the out of state markets (Chattanooga, TN), and after market analysis I believe Chatt to be a great opportunity long-term. Rentals cash flow, there seems to be plenty of fixer upper properties, solid appreciations, the city has seen some tech coming in, etc. 

Anyways, I'm reaching out to see who has been in a similar situation (tough local market vs out of state) and what option you ended up taking? Would you take that same route if done again, what did you learn, is out of state investing not as daunting as it may seem at first? Thanks Everyone!

[Brian Levredge]

Though I live in Chattanooga now, I was living in Los Angeles (my whole life) prior to moving here in 2012 and had started investing in Chattanooga in 2009.  I've also been in construction for a loooonnnnggg time now and can speak directly to trying to do things from afar.  

@Jeffrey Holst, who also happens to be a partner of mine here in Chattanooga is correct.  If you're going to do this long distance, or any reasonable distance, you better have people on your team that you trust implicitly and who also know what they are doing.  I tried doing remote flips with my ex contractor.  It worked ok on some and less so on others.  It wasn't until I moved here and developed a lot more resources that my success really took off.  

So while it may be tempting to venture out from your home base because the numbers look a lot better there are plenty of risks and challenges that will more than offset those perceived discounts and value if not addressed up front.  I also would advise anyone thinking about investing tens of thousands (or more) of dollars and guaranteeing hundreds of thousands more in loans, etc. to spend time and money traveling to that market and really learn about it.  Google only tells you so much.